Case C‑399/08 P, Deutsche Post

Appeal in Deutsche Post state aid case dismissed

By its appeal, the Commission of the European Communities sought to have set aside the judgment of the Court of First Instance of the European Communities (now “the General Court’) in Case T266/02 Deutsche Post v Commission [2008], by which it annulled Commission Decision 2002/753/EC of 19 June 2002 on measures implemented by Germany for Deutsche Post AG.

 By virtue of the German Postverfassungsgesetz , the German postal administration was divided into three distinct legal entities, namely Deutsche Bundespost Postdienst (‘DB Postdienst’), Deutsche Bundespost Telekom (‘DB Telekom’) and Deutsche Bundespost Postbank.

In 2001, Commission decided that Deutsche Post had infringed Art. 82 EC since it had abused its dominant position only in the market segment of parcel deliveries for mail-order businesses for goods ordered by catalogue or electronically, in particular by practising, from 1990 to 1995, a policy of selling below cost at prices lower than the actual costs connected to the type of service concerned (Decision 2001/354)

In 2002, the Commission adopted the contested decision, by which it decided that the amount of the transfers made – pursuant to Art. 37(3) of the PostVerfG – by DB Telekom then by Deutsche Telekom AG in favour of DB Postdienst then of Deutsche Post as compensation for the provision of services of general economic interest (‘SGEI’) was greater than that necessary to compensate for the net additional costs caused to the latter two undertakings by their provision of those services.

The Commission inferred therefrom that the amount corresponding to such overcompensation had been used to make good losses in the segments of the door-to-door parcel delivery sector open to competition. According to the contested decision, those losses amounted to a total of DEM 1 118.7 million and were the result of DB Postdienst’s policy of selling below cost, then that of DEUTSCHE POST during the period from 1994 to 1999, as established by Decision 2001/354.

The Commission therefore concluded that such overcompensation constituted State aid incompatible with the EC Treaty and ordered Germany to take the necessary steps to recover the aid from Deutsche Post.

In support of the present appeal, the Commission raised two grounds, the first alleging breach of Arts 87(1) EC and 86(2) EC, in that the General Court held that the method used to conclude that there was State aid was unlawful, and the second alleging breach of Art. 230 EC, on the ground that the General Court exceeded its powers by substituting its own method for calculating the additional costs associated with the provision of SGEI for that employed by the Commission.

The Court of Justice first of all reiterated that the classification as “aid” within the meaning of Art. 87(1) EC required that all the conditions set out in that provision were fulfilled (see inter alia Case C-206/06 Essent Netwerk Noord and Others [2008], on which I wrote this post).

Thus, for a national measure to be classified as State aid, first, there must be an intervention by the State or through State resources; second, the intervention must be liable to affect trade between Member States; third, it must conferred an advantage on the recipient; fourth, it must distort or threaten to distort competition (see in particular, Case C237/04 Enirisorse [2006]; Case C451/03 Servizi Ausiliari Dottori Commercialisti [2006], on which I wrote this post).

Since this ground of appeal concerned only the third of those conditions, it was, according to the Court appropriate to note that, according to settled case-law, measures which, whatever their form, were likely directly or indirectly to favour certain undertakings or were to be regarded as an economic advantage which the recipient undertaking would not have obtained under normal market conditions were regarded as State aid.

The with regard to undertakings responsible for an SGEI, the Court stressed that where a State measure must be regarded as compensation for the services provided by the recipient undertakings in order to discharge public service obligations, so that those undertakings did not enjoye a real financial advantage and the measure thus did not have the effect of putting them in a more favourable competitive position than the undertakings competing with them, that measure was not caught by Art. 87(1) EC. However, for such compensation to escape classification as State aid in a particular case, a number of conditions must be satisfied. In particular, the compensation could not exceed what was necessary to cover all or part of the costs incurred in the discharge of public service obligations, taking into account the relevant receipts and a reasonable profit for discharging those obligations (see, Case C‑53/00 Ferring [2001] and Case C‑280/00 Altmark Trans and Regierungspräsidium Magdeburg [2003]).

The General Court concluded, correctly, that the method applied by the Commission in the contested decision was defective. The Court of Justice found that the General Court could not properly be accused of not having relied upon deficiencies in the method used by the Commission in the contested decision. Indeed, it followed from the foregoing that those deficiencies were noted by the General Court in its examination of the lawfulness of that method in the light of Art. 87(1) EC.

The Court found that the others grounds of appeal must also be rejected as unfounded. The General Court , without making any error of law, accepted Deutsche Post’s first complaint in its action for annulment, according to which the Commission had infringed Art. 87(1) EC in finding that the transfers made by DB Telekom had conferred an advantage on Deutsche Post. Nor could the General Court validly be criticised for having exceeded its powers in breach of Art. 230 EC.